In 1976, a Philippine-American consortium led by Philippines-Cities Service, Inc. discovered significant quantities of offshore oil northwest of Palawan Island. This discovery was the first commercial oil found in the Philippine Islands. New data suggest that the islands are continental and oceanic crustal fragments. These tectonic fragments have moved to their present positions along major strike-slip zones and plate boundaries. Components of each element are like railroad cars, while strike-slip and plate boundary zones are like railroad rails. Groups of components collect in certain places similar to the collection of railroad cars at railroad sidings.

Three major elements are recognized in the Philippines: the Cuyo, the Sulu, and the Luzon-Mindanao accreted terranes. The carbonate and clastic sediments of these terranes are currently deforming by strike-slip, subduction, and extension.

The tectonic history of the Philippine Island area potentially limits the size of oil accumulations. This greatly increases the risk associated with hydrocarbon exploration in the area.

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